Be sure to remember this post when it happens.
I don't pay attention to this kind of stuff, and even I knew the broad outline of this story several months ago - that nobody at HP likes Fiona (I would have needed someone to remind me of her name) and just about everyone at HP except her thinks merging Compaq and HP is a bad idea.
I find it hard to believe wall street doesn't know this
Since a good friend of mine was 'excessed' by HP,I have had little use for this company. My distaste for HP wasn't helped by the 'computer' they sold me 2 years ago. As a computer it makes a good boat anchor.
People talk about the HP way. In my case it's 'no way another HP'.
You have my permission to copy or retransmit this at your discretion.
I preface my comments by telling you that I was an AT&T (Western Electric) employee before I was an HP employee. (Lucent is Western with a new name) I have been an AT&T stock holder longer than an HP stockholder and held Lucent stock longer than Agilent stock. And I pay attention to my investments. For example, today I am voting my proxy for John A. Young to serve a second term as a Lucent director. How ironic. Too bad it's not baseball, we might want a trade. Let me begin.
The letter from Walter Hewlett and Edwin Van Bronkhorst.
Walter may not be the "best qualified" to review this merger but he has been very close to the electronics and computer industry since his days at Harvard. The cosigner Ed Van Bronkhorst is clearly the best qualified financial expert to assess the value of this deal. Ed was with HP during good times and bad, and always was considered a leader in the industry. Bob Wayman (the former cost control accountant from hp's Loveland division) can't get a ticket to hear Van talk to industry leaders about what to do in this economic environment. I also direct your attention to two of the Packard Foundation directors who are critics of the deal. Do the names Lew Platt or Dean O. Morton ring any bells? A look at the other non-family members of the foundation will show that this is not just "the kids." Industry leaders who understand the danger in this deal are dead set against it. Take the time and look at those people and then look at the gang who spent stockholder money to try and sell this "bad used car deal" with the letter telling us not to listen to boy Walter.
The Board of Directors letter statement of " vision, experience, and wisdom. Let's look at the people who signed that masterpiece.
Carly Fiorina- A product of the Lucent Technologies success story. Carly was honing her managerial skills when Lucent was a wholly owned subsidiary of AT&T.They had NO marketing department and their sales reps ran from one AT&T division to the other to find out what production schedule to keep MA BELL happy. As soon as they had to actually talk to a customer about buying something they fell on their ass. And of course they have done such a great job in R&D that they just own the communications market. (right)!
Lets now look at Director Phil Condit. His solution to Boeing's problems a couple of years ago was to buy (merge) McDonnell Douglas so that their combined strength would dominate the airplane industry. That's why they are crashing faster than the aircraft they make while Airbus is getting all the business. Boeing's only hope is that the war effort will use up enough aircraft, so the Air Force will have to replace some. He is a real expert on mergers, this clown. Not a clue about the computer or electronics industry and his only merger deal in the toilet. This is the vision, wisdom and experience we are told to trust.
Now look at Sam Ginn, Vadafone AirTouch Plc . Why don't we ask Sam to explain why the U.S. Justice Department filed an antitrust action against Vodaphone, Bell Atlantic, and GTE. And the slimy deals they were a part of and how they screwed the public and stock holders. More wisdom and experience. This stuff is public knowledge, but nobody looks at it when making important decisions.
And let's have Mr. Keyworth give us his latest theory from the Progress & Freedom Foundation. This "Foundation" is a lobbying group in DC whose President is Jeffrey Eisenach. Described as Libertarian wacko policy wonk, Jeffrey, with pony tail flying is banging heads with the FCC to get total deregulation of the communications industry. He is quoted as blaming the FCC for the many business failures in the Industry. SURE! Failures like Lucent are the governments fault.
Or maybe the bankruptcy of Covad Communications is FCC's fault. You ask who is Covad? Why let's ask Robert E. Knowling about them since he was the CEO when they went BUST. Covad came out of bankruptcy on December 20, 2001, by settling for 19 cents on the dollar to bondholders. And that eliminated $1.4 Billion of debt. You know what stockholders got. The current CEO is quoted as saying "major steps have been completed in the revitalization of Covad" which translates to "we got rid of Bob, but lost your $ Billion, sorry". More wisdom, and experience.
Richard A. Hackborn, the survivor. The only one left of the HP people on the Board, because he wouldn't take the retirement offer. It was his big chance, because he couldn't cut it when the capable group was still there. He is Carly's mentor.
Let's do a quick count:
Carly Fiorina, sharpened her skills at Lucent, has no engineering or computer background.
Phil Condit, persuaded Boeing to buy McDonnell-Douglas the dying aircraft giant, and still thinks bigger is better.
Sam Ginn, got GTE in hot water with the Justice Department over a merger that screwed all GTE and Bell Atlantic customers.
George A. Keyworth II, whose lobbying group is buying Senators to get the FCC off the backs of the telecommunications companies, so his friends like Sam Ginn and Bob Knowling can rip off more stock holders and customers in the name of progress.
Bob Knowling, with the Covad deal behind him and the money in the bank wants to get a shot at a bigger deal.
Robert P. Wayman, the hotshot financial guy from the Loveland Instrument Division. How come Ned Barnholdt didn't grab Bob for Agilent. My guess is Ned wanted someone more like Van Bronkhorst. Wouldn't you if you knew both. Ned took Bob Walker, proven an excellent choice.
Folks, this is the group with the "wisdom, vision, and experience" they want you to believe will make merger work.
The first sentence of page four of their letter say's all you need to consider. The print is small but it has a big message. "The letter contains forward-looking statements that involve risks, uncertainties and assumptions." Read the next line for yourself. The rest of that paragraph is the "out clause" These folks have invoked the out clause before. Do you want them to "out clause" your future?
Keep in mind that the people who will try to do this rape are the executive committee. Log on to hp.com and look at some of the bios. of people like Susan Bowick. High school teacher, personnel clerk at Loveland Division will terminate 15, 000 hp-ites. She was the leader in the Apollo Computer employee mess.
I've got a Kmart wall and a Lucent wall in my bathroom, I don't want an hp wall. If you get the chance to kill this deal study backgrounds of the people for and against and make an informed choice.
Art Somers, hp 1957 to 1990
The "HP culture" was doomed before an outsider was promoted to CEO. But that may have been the coup de grace. It is perhaps the case that there is or was some deadwood at HP. However, putting an outsider at the front of HP and making her a crusader for re-invention ... there is no way that that would not ruffle a lot of feathers with the rank and file.
Hackborn, whatever else might be said about him, did provide the company with (printer) profits for many of the years that it lost its way and didn't know it. If he says the Compaq merger is the way to go, I would be reluctant to disagree.
Perhaps part of the problem is Carly's style and her outsider status. Some people say she hasn't gone far enough in internal changes. I do think her style would be altered for the better had she come up through rank and file learned what the "HP Way" is from experience rather than reading a glossy brocure on her jet to P.A.-- it's something that the commoners always look for in leadership and cheer to no end when they actually see it there in action. Too bad.
I think Wall Street probably views the merger as does Hackborn, something along the lines of one inevitability of a succession of steps needed to make HP profitable in the future. Internal employee contentedness (or well being, for that matter) counts for zilch (at least, until it is too late).
If so (crystal ball time), there will be a brief spike in stock price when the merger is approved, another when the inevitable post-merger layoffs are announced, and otherwise slow decay if/when the reality hits the air conditioning unit.
Compaq was a decent company until they merged with Digital Equipment and caught the "DEC disease".
It's a merger made in hell. Too bad about the original Compaq and HP -- they were really decent companies.